China's converged services challenged by regulation: Ovum study

Veronica C. Silva |
Aug. 1, 2011

Lack of liberalisation and privatisation are among the barriers preventing a healthy, competitive market

Industry players may be technologically ready to offer converged services in the world's second largest economy. However, according to a recent independent industry analysis, the regulatory infrastructure may not yet be ready for the new type of services, which include mobile TV and IPTV or TV over Internet Protocol.

In a report titled 'Telecoms and Media Convergence in China: a Regulatory Perspective', Ovum said the lack of a Telecommunications Act in China and the lack of a new regulatory framework from the State Council governing converged services are the biggest challenges confronting the country today.

Ovum noted the conflict between two state regulatory bodies that govern the industries - the Ministry of Industry and Information Technology (MIIT) and the State Administration of Radio, Film and Television (SARFT) - that make converged services a reality.

Add to this challenge the fact that the key players in the converged services market - the cable operators and telecommunications companies - are state-owned. Ovum said the insufficent liberalisation and privatisation of the key industries are preventing healthy competition among the players.

Interconnection policy

"The State Council should impose further regulation such as interconnection and anti-monopoly regulation, and remove regulatory barriers between telecoms and media such as the current complex licence grant and management mechanism on converged services," said Charice Wang, an Ovum analyst based in London. "Moreover, it should do so soon, in order to avoid missing its target. The first Telecommunications Act also needs to become effective immediately, as this is an essential move to promote convergence in China."

Clear and focused regulation should guide the development of a next-generation network in China, similar to what other countries in the region have already started.

Ovum cited the case of Taiwan, which has set up the National Communications Commission in 2006, and South Korea, which established the Korea Communications Commission in 2008. These regulatory bodies were set up to focus on the countries' efforts to promote converged telecommunications and media services.

Ovum added that the necessary regulations should be in place just in time when the investments in the telecommunications and media industries are set in place.

Investments

The Chinese government is currently investing CNY2,000 billion (US$308.7 billion) to develop a broadband telecommunications infrastructure by 2015 under the country's 12th Five-Year Plan. Ovum noted that under this current plan, Chinese broadcasters are expanding their next-generation broadcasting (NGB) networks, over which a wide range of converged services such as fixed telephony, broadband, and media will be provided.

Regulation should also be in place as competition heats up in the broadband and value added services markets.

"The NGB networks will help broadcasters to enter the fixed and mobile broadband markets and compete head-on with the three major telecoms operators. Telcos are developing their own strategies and responses to the converged environment," said Ovum.

"A new regulator integrating the current MIIT and SARFT should be launched in the near future, possibly in 2013 when China's government restructuring next happens," Wang concluded.